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Bulls riding Polaris before earnings

One investor is trying to turn the market's paranoia into free money before Polaris Industries reports earnings today.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 1,200 May 90 calls for an average premium of $1.74 and the sale of a similar number of May 80 puts for $2.10. Volume was more than twice the previous open interest at each strikes, indicating that these are new positions.

Traders often sell puts to raise money for buying calls , resulting in an investment that behaves similarly with owning a stock. The unusual aspect of yesterday's transaction is that implied volatility is 43 percent in the puts versus 39 percent in the calls, suggesting that the market sees a greater risk of a drop than a move higher. It also pushed up the value of the puts, letting them collect a credit of $0.36 just to open the trade.

The investor now stands to earn infinite profits if the maker of off-road vehicles closes above $90 by expiration. He or she is also on the hook to buy the stock for $80 if it goes before that level. (See our Education section for more on how options can be used to manage trades.)

PII fell 0.66 percent to $85.24 yesterday and has been steadily trending higher since the market bottomed in early 2009. The shares have retreated since late March but are now trying to make another higher low above their 200-day moving average.

Total option volume was 7 times greater than average in the session, according to the Heat Seeker.